Navigating 2026 uncertainty, FTI urges faster FTAs and structural reform

The Joint Standing Committee on Commerce, Industry and Banking (JSCCIB) estimates Thailand’s economy will expand by only 1.6–2.0% in 2026, easing from an expected 1.8–2.2% in 2025.

The Siam Commercial Bank Economic Intelligence Centre (SCB EIC) has forecast growth of just 1.5% in 2026, which would be the lowest in more than 30 years.

The International Monetary Fund (IMF) expects global growth to slow next year compared with this year, a trend that would significantly affect Thailand given its reliance on exports. The IMF has also projected that over the next five years—by 2030—Thailand’s GDP ranking could slip to fifth in ASEAN, from its previous position as second.

Kriengkrai Thiennukul, chairman of the Federation of Thai Industries (FTI), told Krungthep Turakij that 2026 would be another year in which Thailand’s economy and industrial sector must operate amid heightened uncertainty, driven by both external pressures and domestic structural constraints. 

As a result, the industrial sector is expected to remain in “stabilisation mode”, rather than making a full recovery.

He warned that if the slowdown persists without sufficient support, Thailand could slide into stagnation—likened to being “stuck in the mud”—and lose competitiveness over the long term.

Risks mount: global slowdown, politics, floods and border tensions

Key pressure on Thailand’s economy continues to come from external factors, including a global slowdown, trade war, uncertainty over US tariff and trade policies, and intensifying competition from imports.

At the same time, domestic structural constraints are becoming more pronounced, including vulnerabilities in households and businesses that weigh on purchasing power and investment. Political uncertainty and late-year flooding are also concerns, with the JSCCIB estimating potential economic damage of around 110–120 billion baht.

In addition, tensions along the Thai–Cambodian border have continued to dampen economic activity and cross-border trade.

Exports may contract in 2026; FTAs seen as a lifeline

Against this backdrop, Kriengkrai said Thailand’s exports in 2026 are likely to slow, with a contraction forecast at between -1.5% and -0.5%, due to the trade war, policy uncertainty among major powers, and geopolitical tensions.

Industry therefore sees accelerated negotiations on new free trade agreements (FTAs) as a key mechanism to expand markets, reduce reliance on existing destinations, and strengthen the competitiveness of Thai businesses.

Industrial production is also expected to continue slowing. The Manufacturing Production Index (MPI) remains under pressure from transshipment and dumping of low-priced goods, forcing many industries to cut output or adjust business models.

Meanwhile, SMEs continue to face debt and liquidity constraints, affecting employment and overall economic stability.

Weak spending power; baht strength and CBAM add to costs

Consumer spending has recovered only modestly amid high household debt and cautious sentiment. A stronger baht has also weighed on both tourism and exports, although the gradual recovery in tourism may still help support income in some sectors.

Another key risk is climate change, including floods and drought, as well as environmental measures by trading partners such as the EU’s Carbon Border Adjustment Mechanism (CBAM) and the bloc’s deforestation regulation (EUDR). 

These are increasing business costs and forcing exporters to upgrade production standards and strengthen traceability systems.

Despite the fragile outlook, investment in 2026 is still expected to grow in some industries as companies accelerate domestic supply-chain development—particularly in digital industries, electric vehicles, electronics, food processing, and clean energy—supporting efficiency gains and longer-term investment attractiveness.

“Reinvent Thailand” proposed to reshape the economy

Industry has urged the government to accelerate economic restructuring under the “Reinvent Thailand” concept, which it says is central to lifting the country’s potential. 

Proposals include adding value in manufacturing, strengthening supply chains, and promoting local content and Made in Thailand (MiT) products through tax measures, financing, and public procurement. 

These efforts align with the government’s “Quick Big Win” measures aimed at supporting SMEs.

On political stability, Kriengkrai said a 2026 election that produces a unified government with policy continuity would help restore investor confidence and enable more tangible structural reforms.

He concluded that while Thailand’s economy in 2026 remains fragile, it is also a pivotal moment to lay new foundations. 

If the country can upgrade industry from original equipment manufacturing (OEM) towards higher value-added sectors—powered by technology, innovation, automation and clean energy—under “ONE Thailand” cooperation, it may yet turn uncertainty into a starting point for more stable and sustainable growth.